Mr and Mrs own a freehold business premises . For more than 10 years , they have rented out the shop to their own trading company in which they are Directors / Shareholder ( 50%/50% ). They charge their company an annual rent ( well under market value ) and declare the Rent on their Personal Tax Returns ( together with Salaries/Dividends from company ). Company will now cease trading and Directors will sell the freehold property (due to illhealth ) . Question :- For CGT purposes , will each one of them be entitled to Entrepreneurs Relief or Business Asset Disposal Relief , £ 1 Million each ? Thank you .
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BADR may be due in part.
"where the whole or part of the period falling after 5th April 2008 (see FA2008/Sch 3 Para 6) for which the asset(s) which are the subject of the associated disposal were used for business purposes, they were available for that use only on payment of rent (and so were to an extent investments, rather than being employed solely for the purposes of the business).
The adjustment will reflect the extent to which the rent paid for periods after 5th April 2008 is less than the full market rent for the assets.
“Rent” in relation to an asset, for the purposes of Business Asset Disposal Relief, is defined at TCGA92/S169S(5) and includes any form of consideration given for use of the asset.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64145
Thank you DJKL . Thank you for the very clear notes and for the link . Very helpful indeed . Very kind .
You are welcome- must admit I have never had to do a computation for an associated disposal rented at undervalue so good luck.